Bank satisfies Jewish usury laws KEEPING KOSHER

November 28, 1990|By Ross Hetrick | Ross Hetrick,Evening Sun Staff

There are kosher pickles, kosher rye bread and kosher hot dogs. Now there is a kosher bank.

In an effort to cater to observant Jews in the Baltimore area, Maryland Permanent Bank & Trust Co., a bank with one office on Reisterstown Road, became the first bank in the Baltimore area to change its charter so that it will comply with Jewish usury laws.

"They know that at this bank, it's all been taken care of," said Warren D. Klawans, chairman of the bank.

The need for a kosher bank stems from the Jewish prohibition against Jews either charging or paying interest to other Jews. However, there is no restriction against Jews lending to non-Jews, or vice-versa. Since the ownership of Maryland Permanent is predominately Jewish, the bank fell under the Jewish prohibition.

To become a kosher institution, the bank in June put a hetter iskaw, a Jewish contract, in its charter. The hetter iskaw, in essence, redefines key banking terms. Instead of loans, the bank makes "investments" and in the place of interest, customers pay profits."

While the hetter iskaw is important to the observant Jew, it has little effect on the way the loan -- or investment -- is actually handled.

"For all practical purposes, it doesn't really make any difference whether you call it an investment or whether you call it a loan, the profit or interest that is generated will be the same amount," said Rabbi Moshe Heinemann, the rabbinic administrator for STAR-K Kosher Certification, the agency that sets kosher standards.

While there are a few cases where a business could claim that there was no profit and get out of the loan, in reality that is very hard to do. "It is a lot easier to declare bankruptcy that to go through this process," said Avrom Pollak, president of STAR-K.

In dealing with Jewish-owned banks, Jews who wanted to observe the restriction are required to have a separate hetter iskaw signed by a bank official. But with the hetter iskaw in the charter now, there is no need for a separate agreement.

Klawans decided to make the charter change after discussing it with orthodox Jewish friend. So far the reaction has been "very favorable," he said. At the grand opening of its new location in July, 500 new accounts were opened and Klawans estimates that about 400 were opened by Jews.

"Of those [that opened accounts], a very significant number were very pleased and interested that we are a kosher bank," Klawans said. "So we had a financial motive, as well as the desire to be helpful to the Jewish community," he said.

The origins of the Maryland Permanent date back to 1910, when the Maryland Permanent Building and Loan was founded in East Baltimore as a thrift that meet once a week, according to Klawans.

The thrift was part of the state system of savings and loans and the accounts were covered by private insurance. But that system collapsed in the Maryland savings and loan crisis and Maryland Permanent converted to a commercial bank in July 1989. Its deposits are now insured by the Federal Deposit Insurance Corp.

Being kosher makes it easier for Jews observing the usury laws to use the bank, according to Pollak of STAR-K.

"They generally don't want to rock the boat," Pollak said. "They're either embarrassed to do it, or a little shy about it. In order to get around that, they may not go to a Jewish-owned bank in the first place," he said.

As to exactly why there is a Biblical prohibition on lending with interest is unclear. "No one really knows what the reason is because the Bible doesn't specify what the reason is," said Rabbi Heinemann. "Every benefit or pleasure that is offered in this world is limited to some extent for orthodox Jews," he said. "Money is limited in the fact, that if you want to try to make some money from your money with a fellow Jew, you can not do it."